News

When Bing Crosby recorded Don’t Fence Me In in 1944, it went on to sell more than a million copies and top the charts for eight weeks. The lyrics express a yearning for freedom that still resonates with people of all ages and political hues today. Now, as then, it is not clear where to draw the boundaries between one person’s right to be free from restriction and another’s right to protection. If I am free to wander through your back garden, you will not be best pleased if I pick your prize flowers. If, on the other hand, you surround every field with barbed wire, don’t blame me if I lose interest in the countryside or ask me to help conserve nature.

The theory highlights some of the difficulties behind the ring-fencing of local authority grants. On the one hand, if central government gives local authorities complete freedom in their spending, some people fear that funding to vulnerable groups might be cut and transferred to more politically popular causes. On the other, if it lays down the law too severely, then councils will end up as mere administrative agents of central government, fewer people will be interested in local government, and the community’s willingness to participate will wither.

So where does the cash come from? According to local government figures,¹ councils receive about three-quarters of their money for delivering services from central government. The rest is raised via council tax. Central government cash comes in two forms. One is a non-ring fenced formula grant, allocated on the basis of a formula that determines each authority’s share according to its circumstances. This includes an assumed level of council tax. The second is specific government grants - allocated separately - of which some are ring-fenced. However, the number of grants that are ring-fenced has shrunk in recent years.

The Labour government has promoted decentralisation since it came to office in 1997. In November 2002 the Office of the Deputy Prime Minister announced a "dramatic devolution of power to local government" with its package of "freedoms and flexibilities". This signalled a cut in the proportion of government grant that is ring-fenced, and gave flexibility in spending decisions - excluding grants passed to schools - to councils judged as excellent under the Audit Commission’s new comprehensive performance assessment.

Personal social services funding for 2004-5 is £14bn; of this £1.7bn is classed as "special and specific grants" and only £312m of that is actually ring-fenced.

But there are conflicting views on independence. The Local Government Association advocates non-ring-fenced funding and sees it as a crucial element of local accountability. However, many social services directors are nervous about losing control of the specific grants, fearing some of their most vulnerable clients will lose out.

Mike Heiser, senior project officer at the LGA, says the association favours non-ring-fenced funding because it gives more discretion to local authorities to allocate funds in line with locally decided priorities. He adds: "But we do accept there is a case for ring-fencing in certain cases - when there is a new function, or when expenditure pressures are divided unevenly among some authorities. Supporting People is one example. In these circumstances we think ring-fencing should be kept under review, with a view to removing it in future years. There are also transitional issues concerned with moving from ring-fenced to non-ring-fenced funding which have to be dealt with sensitively, such as preserved rights."

The London Borough of Hammersmith and Fulham is rated as "excellent" by the Audit Commission. James Reilly, the council’s director of community services, acknowledges the LGA’s argument but cautions: "My ideal world would be one in which local government is strong, well engaged with its community and well enough resourced for there not to be serious conflicts. Strong community involvement with local services benefits social services and our users, and more local discretion over spending decisions does help to build such involvement. But the problem is that there aren’t enough resources."

Local authorities may lean towards ring-fenced grants, he adds, particularly when education budgets are protected and the burden falls on their other big departments for savings and balancing the books.

There are advantages in retaining some control over finances. Anne Williams is co-chair of the Association of Directors of Social Services’ resources committee and director of community and social services for Salford Council. She says: "Ring-fenced grants have enabled us to make great strides in particular areas - for example, the Quality Protects programme for children. And the grants related to delayed discharges have had a very positive effect in targeting money to these groups."

While there are legal constraints and a performance agenda to ensure that councils spend money on protecting children and cutting delayed discharges, Williams adds that without ring-fenced grants no one can guarantee the money intended for one purpose is not hijacked for another.

Many people are unaware of the bulk of the work social services departments do as it is often hidden from view. So when the public are consulted about where their local authority should be spending its budget, more visible tasks such as tackling crime and cleaning up the environment top their list and social services are not mentioned.

Local spending decisions and tensions can also amplify the potential for greater variability of services between different councils. Reilly recognises this problem, too: "If the government wants the citizen to experience a standardised service then there is an argument to get initiatives standardised, delivered and bedded in, to avoid a postcode lottery. I would consider ring-fencing for this."

But there are other concerns relating to cutting ring-fencing: worries about the funding for the Supporting People programme and for people with preserved rights. Caroline Highwood, assistant social services director for Kent Council, says Supporting People could be a massive problem, with expenditure on it capped and rumours of reductions in next year’s grant coinciding with growing demand.

Williams believes that some of the most "excluded" service users - such as those with mental health problems, drug and alcohol problems or learning difficulties - could lose out if Supporting People is cut. There are anxieties, too, about the funding changes for people with preserved rights. The original grant was ring-fenced and linked to specific people; now the money will go into the general allocation and some authorities with many private care homes, such as Kent, are big losers.

Highwood says: "This is directly detrimental because it is ministers making decisions about local funding, not local members. These are real people in real beds, who are vulnerable. Some council members will protect the services because they regard them as important, but others may well say ‘we have even higher priorities elsewhere’."

Ultimately, how budgets are divvied up comes down to a local authority’s commitment to social services. Reilly says: "It is about how much they are prepared to put their money where their mouth is.

Where they are, you don’t need ring-fencing. Where they’re not, you are going to want it."

¹ Local Government Financial Statistics for England 14, Office of the Deputy Prime Minister, 2003